Private mortgage insurance (or "PMI" as many refer to it on their mortgage and escrow statements) effects many Americans who cannot afford to get an 80/20 debt ratio on their homes. If you do not have 20% equity and no other "piggyback" loan opportunity- you most likely will have PMI.
According to the Mortgage Insurance Companies of America ("MICA"), the cost of private mortgage insurance for a 30-year loan on a median-priced home of about $224,500 ranges from $50 to $100 per month.
In light of the continual (and what appears to be never ending) sub-prime mortgage mess, Congress and President Bush have continued the allowance of the deductibility of PMI as an itemized deduction (reported on Schedule A of your Form 1040). Bear in mind, there are several details:
- you must be able to itemize to take this deduction (most homeowners can, so this is not as much of a hurdle as it appears)
- there are adjusted gross income limitations to this deduction
- only mortgages issued after 12/31/2006 qualify
MICA expects this to effect 2.6 million people in 2007 for a savings of about $350 a year for each eligible participant.
However, Congress does not expect this sub-prime mortgage mess to last forever- hence, neither will the deduction- it expires at the end of 2010.
Please vist a competent tax professional for advice on all tax preparation and tax debt matters. The laws change so frequently (the tax code appears to change as frequently as Bernanke changes the Federal Reserve rate) that you must be a tax professional to keep up with it.